IMPORTANT BANKING INTERVIEW - QUESTION & ANSWERS - PART - I

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1. Why do you want to join banking sector?

=> Banking is one of the fastest growing sectors in India with more stable and high growth and more
over providing wide range of career opportunities for graduates. So I want to take an opportunity to
join in a bank.

2. What is the difference between Cheque and Demand Draft?

=> Cheque :

Cheuqe is a negotiable instrument instructing a bank to pay a specific amount from a specific account
held in the maker/depositor name with that Bank.

=> Demand Draft :

A demand draft is an instrument used for effecting transfer of money. It is a negotiable instrument.

3. What is a Non-Banking Financial Company (NBFC)?

=> A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act,
1956 engaged in the business of loans and advances, acquisition of
shares/stocks/bonds/debentures/securities issued by Government or local authority or other
marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but
does not include any institution whose principal business is that of agriculture activity, industrial
activity, purchase or sale of any goods (other than securities) or providing any services and
sale/purchase/construction of immovable property. A non-banking institution which is a company
and has principal business of receiving deposits under any scheme or arrangement in one lump sum
or in installments by way of contributions or in any other manner, is also a non-banking financial
company (Residuary non-banking company).

4. NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ?

=> NBFCs lend and make investments and hence their activities are akin to that of banks; however
there are a few differences as given below:

- NBFC cannot accept demand deposits;

- NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on
itself; deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not
available to depositors of NBFCs, unlike in case of banks.

5 . What is Private Banking?

=> Banking services offered to high net-worth individuals. Private banking institution assists the high
net-worth individual in investing his/her money in exchange for commissions and fees. The term
"private" refers to the customer service being rendered on a more personal basis.

6. What is BSBDA?

=> Under the guidelines issued on August 10, 2012 by RBI: Any individual, including poor or those
from weaker section of the society, can open zero balance account in any bank. BSBDA guidelines
are applicable to "all scheduled commercial banks in India, including foreign banks having branches
in India".

- All the accounts opened earlier as 'no-frills' account should be renamed as BSBDA. Banks are
required to convert the existing 'no-frills' accounts’ into 'Basic Savings Bank Deposit Accounts'.

- The 'Basic Savings Bank Deposit Account' should be considered as a normal banking service
available to all customers, through branches .

- The aim of introducing 'Basic Savings Bank Deposit Account' is very much part of the efforts of
RBI for furthering Financial Inclusion objectives.

7. What is BPS (Basis Points)?

=> BPS (Basis point) : - BPS is an acronym for basic points is used to indicate changes in rate of
interest and other financial instrument.

- 1 BASIC POINT IS EQUAL TO 0.01%

So when we say that repo rate has been increased by 25 bps, it means that the rate has been increased
by 0.25%

8. What is KYC?

=> The Reserve Bank of India (RBI) has advised banks to follow ‘KYC guidelines’, wherein certain
personal information of the account-openingprospect or the customer is obtained. The objective of
doing so is to enable the Bank to have positive identification of its customers. This is also in the
interest of customers to safeguard their hard earned money.

-- The KYC guidelines of RBI mandate banks to collect three proofs from their customers. They are-

1.Photograph

2. Proof of identity

3. Proof of address

9. What is Sub-prime crisis?

=> The current Subprime crisis is due to sub-prime lending. These are the loans given to the people
having low credit rating.

10. What is Base Rate?

=> It is the minimum rate of interest that a bank is allowed to charge from its customers. Unless
mandated by the government, RBI rule stipulates that no bank can offer loans at a rate lower than BR
to any of its customers.

- It is effective from, July 1, 2010. However, all existing loans, including home loans and car loans,
will continue to be at the current rate. Only the new loans taken on or after July 1 and old loans being
renewed after this date will be linked to BR.

11. What is SWIFT?

=> SWIFT :- Society for worldwide Interbank financial tele- communication.

- India was 74th Nation to join SWIFT Network.

- SWIFT Code is a standard format of bank Identifier code. This code is used particularly in
International transfer of money between banks.

- A majority of FOREX related message are sent to correspondent banks abroad through SWIFT.

- SWIFT Code consist 8 or 11 character when code is 8 digit, It is referred to primary office

4 – bank code

2 – country code

2 – location code

3 – branch code (optional).

12. What is Swabhimaan Yojana?

=> Swabhimaan is a financial inclusion plan of bank to take banking to the door steps of the remote
village where banking facility are not available.

13. What is NOSTRO and VOSTRO account?

=> NOSTRO Account: A NOSTRO account is maintained by an Indian bank in the foreign countries.

- VOSTRO Account: a vostro a/c is maintained by a foreign bank in India with their corresponding
bank.

14. What is a DeMat Account?

=> DeMat is nothing but a dematerialized account. If one has to save money or make cheque
payments, then he/she needs to open a bank account. Similarly, one needs to open a DeMat account if
he/she wants to buy or sell stocks. Thus, DeMat account is similar to a bank account wherein the
actual money is being replaced by shares. In order to open a DeMat account, one needs to approach
the Depository Participants [DPs].

-- In India, a DeMat account is a type of banking account that dematerializes paper-based physical
stock shares. The DeMat account is used to avoid holding of physical shares: the shares are bought as well as sold through a stock broker. In this case, the advantage is that one does not need any physical evidence for possessing these shares. All the things are taken care of by the DPs.

-- This account is very popular in India. Physically only 500 shares can be traded as per the provision given by SEBI. From April 2006, it has become mandatory for any person holding a DeMat account to possess a Permanent Account Number (PAN).

15. What is RuPay Card?

=> RuPay is the Indian domestic card payment network set up by National Payments Corporation of
India (NPCI) at the behest of banks in India. The RuPay project had been conceived by Indian Banks
Association (IBA) and had the approval of Reserve Bank of India (RBI).

- RuPay LogoNational Payments Corporation of India (NPCI) has a plan to provide a full range of
card payment services including the RuPay ATM, RuPay MicroATM, Debit, Prepaid and Credit
Cards which will be accepted in India and abroad, across various channels like POS, Internet, IVR
and mobile etc.

- The initial focus of NPCI would be to approach those banks who have not been issuing any
payment card at all more specifically – Regional Rural Banks (RRBs) and urban co-operative banks.

- All Public Sector Undertakings (PSU) banks set to join RuPay system by the end of year 2012.
RuPay-based debit cards can be used by the consumers on the Internet from September, 2012.

- The government of India had launched India’s first domestic payment card network, RuPay, to
compete with Visa Inc and Mastercard Inc.

16. What is foreign exchange reservers?

=> Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign
currency deposits and bonds held by central banks and monetary authorities.However, the term in
popular usage commonly includes foreign exchange and gold,SDRs and IMF reserve positions.

17. What is Bancassurance ?

=> Bancassurance stands for distribution of financial products particularly the insurance policies
(both the life and non-life), also called referral business, by banks as corporate agents, through their
branches located in different parts of the country.

18. What is Money Laundering ?

=> Money laundering is the processes of concealing the source of obtain money. Money or funds
obtained through illegal activities are presented as legitimate.

19. What is the difference between Nationalized bank and Private Bank ?

=> A Nationalized bank is one that is owned by the government of the country. Since the people
decide who the government is, they are also referred to as public sector banks. The government is
responsible for the money deposited into the accounts of these banks. Where as a private sector bank
is one that is owned by an independent individual or a company that is controlled by a few
individuals. In short, the bank is owned by someone else and they run the bank. The person
owning/running the bank is responsible for the money deposited into the accounts of these banks.

20. What are non-perfoming assets?

=> A classification used by financial institutions that refer to loans that are in jeopardy of default. 
Once the borrower has failed to make interest or principal payments for 90 days the loan is 
considered to be a non-performing asset. Also known as "non-performing loan".